Starting on a global educational journey is a dream shared by countless students seeking to broaden their horizons. The idea of studying abroad brings excitement, cultural enrichment, and academic growth, but it often comes with a hefty price tag. As the cost of international education continues to rise, many students find themselves considering abroad education loans to turn their aspirations into reality.
However, before applying for a foreign education loan, it is important to approach the decision with prudence and foresight. This article aims to guide students through some of the crucial questions they should ask before taking an abroad education loan. From understanding the total cost of education to steering the details of interest rates, collateral requirements, and repayment terms, each inquiry plays a pivotal role in shaping a well-informed financial approach.
In the following exploration, we will delve into these key questions, providing insights that help students make better choices about financing their overseas education. So, tightly fasten your seatbelt as we explore more.
Types of Overseas Education Loans
Before we explore the key questions, let us first understand the two types of overseas education loans.
- Secured Education Loan
In a secured education loan, the applicant pledges collateral, such as property or FD, as security to the financial lender. The collateral acts as a guarantee for the loan and the value of the collateral determines the loan amount. - Unsecured Education Loan
An unsecured education loan, in contrast, does not require the applicant to provide any collateral as security for the loan. Approval for an unsecured education loan is typically based on the Coapplicant’s creditworthiness, financial history, CIBIL score, and other relevant factors.
Now that we’ve explored the various types of education loans, let’s shift our focus to the leading financial institutions that provide overseas education loans.
Financial Lenders in Spotlight
Below we have given the popular financial lenders that you can consider for taking an overseas education loan.
| Nationalised Banks | Private Banks | NBFCs | International Lenders |
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Since we have warmed up with a basic understanding of overseas education loans, let us now glance at the questions to ask before taking an education Loan to study abroad.
Questions to Ask Before Taking an Overseas Education Loan
- What is the Total Cost of Education?
Before getting an answer to how to get education loan for abroad studies, understanding the total cost of your abroad education is the very first step in determining the loan amount you will need. Consider some of the essential factors such as tuition fees, accommodation, living expenses, and other miscellaneous costs. Create a comprehensive budget to avoid underestimating your financial needs.
- Are There Scholarship Opportunities?
One important factor to consider, before opting for an overseas education loan, is exploring scholarship options. Many universities and private organizations offer scholarships based on academic merit, extracurricular achievements, or specific criteria related to your field of study. Availing a scholarship alongside an education loan can significantly reduce the financial burden and keep your savings intact.
- What are the Interest Rates and Terms of the Loan?
One of the most essential aspects to know before applying for an overseas education loan is to research and compare interest rates offered by different financial lenders. For e.g. nationalised banks have lower interest rates as compared to other lenders. Exploring diverse schemes, like the SBI Global Ed Vantage Scheme or the Special Union Education Loan Scheme for Abroad Studies, offered by different banks can provide a substantial quantum of finance coupled with advantageous interest rates. Ultimately, securing a loan with lower interest rates and favorable repayment terms can yield significant benefits in the long term.
- What is the Repayment Period?
It is important to determine the length of the repayment period for the loan. A longer repayment period may result in lower monthly payments but could lead to higher overall interest costs. Conversely, a shorter repayment timeframe may necessitate higher monthly payments but could result in reduced overall interest. Therefore, thorough scrutiny of this aspect across various financial lenders is essential.
- How long is the Moratorium Period?
The moratorium period, spanning the study and job search phases the course duration + 6 or 12 months, is a feature provided by the banks. Government banks do not mandate the payment of simple interest during this period, while private banks enforce it as a compulsory requirement. This period allows you to delay repayment until after graduation, giving you time to secure employment.
- Are There Any Prepayment or Late Payment Penalties?
There are many financial lenders that don’t levy any prepayment penalties, yet it is important to inquire about prepayment penalties or fees associated with repaying the loan ahead of schedule. There are some financial lenders that impose charges for early repayment, and being aware of these can help you make informed decisions about managing your loan amount.
- What is the Processing Fee?
The processing fee is the initial charge imposed by the financial lender for the approval of an education loan. Government banks typically levy a processing fee of 10,000, excluding GST. There are some private banks that charge 1% of the loan amount, whereas some bank imposes a processing fee of 15,000 if the loan surpasses 20 lakhs. This information is crucial for planning a budget and ensuring that funds are available when needed.
- How Does the Loan Affect Credit History?
For taking an unsecured loan, an applicant needs to have a good credit history and a CIBIL score above 700. Thus, if you want to know how to get education loan for abroad studies without collateral, it is better that you reach out to the top overseas education loan advisors.
Concluding Insights
These are some of the important questions that one must consider before applying for an overseas education loan. This will help you secure your desired loan amount with lower interest rates and other benefits to complete your study abroad dream. We hope this article was helpful. Good luck.
